Novo’s Ozempic, Wegovy Targeted for Medicare Price Cuts (3)

The US plans to slash the price it pays for the Novo Nordisk A/S blockbusters Ozempic and Wegovy, the latest drugs to be targeted under legislation that’s expected save the government more than $200 billion over a decade.

Novo’s treatments for obesity and diabetes headline the government’s list of medicines that will be subject to price negotiations over the next year as part of a Biden administration effort to reduce drug costs for the Medicare health program for seniors.

Novo’s American depositary receipts were down 4.7% as of 11:14 a.m. in New York.

It’s the latest in a string of setbacks for Novo this morning. Results from a study of a higher dose of Wegovy disappointed investors and European drug regulators said they were investigating cases of a rare eye condition after concerns it could be linked to Ozempic.

With list prices of about $1,000 a month, Novo’s treatments are among the biggest products in pharmaceutical history, bringing in nearly $30 billion a year. Their prices have brought congressional scrutiny. Sales to Medicare, the US health program for seniors, account for about 10% of Novo’s annual revenue, according to an analysis by Leerink Partners.

The negotiated price, set to take effect in 2027, could have a marked impact on Novo’s business. The last round of IRA negotiations gave Medicare an average 22% price reduction for affected drugs. Novo’s diabetes drug Rybelsus, which has the same main ingredient as Ozempic, is also on the government’s list.

A spokesperson for Novo said the company “remains opposed to governments price setting through the IRA and has significant concerns about how the law is being implemented by this administration,” such as how three of its drugs were included at the same time because they all have the same main ingredient.

Eli Lilly & Co.’s competing Mounjaro and Zepbound won’t be eligible for negotiation until 2029 at the earliest. However, price changes for Novo’s drugs could affect others in the same class.

Lilly’s shares fell 2.5%.

Negotiations Fought

Drugmakers have fought the negotiations with suits and claims that the lower prices deplete them of incentives to develop new drugs. Bloomberg News reported earlier this week that a group of companies, including Lilly, are asking for a pause in the negotiations.

On Friday after the list of drugs was released, the drug industry lobbying group PhRMA called the negotiation process “dangerous” and said it discourages companies from making pills, like many of the drugs on the new list. Pills are subject to negotiation sooner than complex injectable drugs under the law, a point the industry has fought unsuccessfully to change.

The announcement was released weeks ahead of a Feb. 1 deadline as President Joe Biden looks to claim a parting political victory before President-elect Donald Trump’s inauguration.

The news Friday “puts the onus on the incoming Trump administration” to decide if the list should continue through the implementation process, Bloomberg Intelligence analyst Duane Wright said in a note.

“There have been few clues on how President-elect Donald Trump will use the price-setting authority he once supported,” he said. “We believe the door is open to modifications — versus repeal — to address industry and patient stakeholder concerns about disparate treatment” of pills versus complex injectable drugs.

‘Law of the Land’

The next administration will be bound by law to continue the negotiation process on a tight timeframe, according to Centers for Medicare and Medicaid Administrator Chiquita Brooks-LaSure. CMS staff has been in touch with Trump’s transition team about the policy, she said, but she personally hasn’t been approached by Mehmet Oz, Trump’s pick to lead the agency.

“Medicare negotiation is now the law of the land,” she said in an interview, adding that won’t change without action from Congress and that CMS must follow the law. “This is the only way to make sure that drugs are affordable in the Medicare program.”

Changing the process would require new guidance or potential rulemaking, CMS chief of staff Erin Richardson said on a call with reporters.

“Today’s announcement means Americans may finally get a better deal on Ozempic and Wegovy — but only if Trump does not walk away from the negotiating table,” Vermont Senator Bernie Sanders said in a statement. Sanders has repeatedly called on Novo Nordisk to lower the price of its drugs.

Other Drugs

Other drugs up for 2027 price decreases include cancer drugs Ibrance, made by Pfizer Inc., Xtandi, made by Pfizer and Astellas, Pomalyst, made by Bristol Myers Squibb Co., and Amgen Inc.’s psoriasis drug Otezla.

Pfizer said the negotiation process discourages the development of new medicines, but that it will work to protect patients’ access to Ibrance. Bristol said the inclusion of its cancer medicine Pomalyst is unlikely to benefit patients or the government, as the drug is expected to face generic competition before the negotiated price kicks in. And while Astellas said it’s prepared to participate in negotiations, it argued the IRA is already leading to higher costs for patients and coverage disruptions.

Amgen declined to comment.

The price-cutting talks are part of Biden’s signature Inflation Reduction Act. Ten drugs were designated for price negotiations last year, and the law is estimated to save the government $237 billion over a decade as more join the list.

The newly added drugs made up 14% of Medicare Part D drug spending, or $41 billion, between November 2023 and October 2024, according to the government.

(Updates with CMS comment in second section; updates shares throughout.)

--With assistance from Madison Muller, John Lauerman and John Tozzi.

To contact the reporters on this story:
Ike Swetlitz in Boston at iswetlitz@bloomberg.net;
Damian Garde in New York at dgarde@bloomberg.net

To contact the editors responsible for this story:
Cynthia Koons at ckoons@bloomberg.net

John Lauerman

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